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Jewish World Review August 13, 2003 / 15 Menachem-Av, 5763

Jan L. Warner & Jan Collins

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Slacker son will blow his fortune; lawyer's role in "estate-planning" | Q: Of our four children, three are responsible. The fourth, our 33-year-old son, can't keep a nickel in his pocket. His wife is just as bad. My wife and I would like to treat all of our children equally, but we have nightmares of he and his wife squandering his inheritance (which will come from our IRAs, home, bank accounts and stocks). We want to make sure his share is doled out in installments. Are we wrong in our thinking?

A: Absolutely not. You'll be doing your son a big favor by protecting him from himself. Unless you and your wife have a taxable estate that will require more complex planning, you will leave all assets to her and vice-versa.

At the second parent's death, you and your wife could divide the residual property into four equal shares, three of which would be distributed outright to your financially responsible children. The fourth share would be placed in a trust for your "fiscally challenged" child.

The trustee could be given the discretion -- but not the obligation -- to distribute income and, to a limited extent, principal, to your son under certain conditions. For example, you might want to include language that requires your son to give copies of his tax returns and credit reports to the trustee, so that, if your son is clearing up his debt, the trustee can provide additional benefits as incentives. Properly drafted, this type of trust should allow your son to be rewarded when he deserves it and prevent creditors from attacking the proceeds for his debts.

Decisions like this are difficult to make, because your son will probably be hurt that he wasn't treated like the other children. To head off family disputes after your death, you may want to discuss your concerns with your son now, and choose a corporate trustee in lieu of your other children.

Next Week: How to use a special trust as beneficiary of your IRAs to protect those assets from being squandered by spendthrift beneficiaries.

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Q: I plan to retire next year, so my wife and I began the "estate-planning" drills that we should have started years ago. We've read a couple of books, but we're still not sure what we want our lawyer to do.

A: Start by deciding and prioritizing your goals. Sample goals that can be "rated" in order of importance include:

-- Avoiding estate taxes (if you and your wife will have taxable estates).

-- Avoiding probate costs (if you and your wife live in a state where the cost of probate is high).

-- Making sure children of prior marriages are not left out or, if you are in a second or later marriage, ensuring that the spouse does not receive what is intended for children.

-- Planning for the consequences of long-term care and disability (by buying disability or long-term care insurance) and making sure you have enough money to last over your life expectancies.

-- Making gifts to charities, if you are so inclined.

-- Ensuring that a beneficiary who would otherwise inherit from you will receive nothing or a limited share.

-- Making provisions for a handicapped or disabled child or spouse through appropriate trusts.

-- Establishing a pattern of gifting to children or grandchildren during your lifetime.

-- Protecting beneficiaries from blowing their inheritance by doling it out over time.

-- Making sure your spouse is protected by use of an insurance trust or other source of income that will keep him or her comfortable if you die first.

-- Nominating guardians for minor or disabled children and, when appropriate, third-party fiduciaries.

-- Avoiding family disputes over what you decide to do through penalty provisions in your wills and/or arbitration agreements.

Add to this list as you deem necessary, establish your goals, communicate them to your lawyer and let him or her take it from there by preparing a plan for your approval.

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JAN L. WARNER received his A.B. and J.D. degrees from the University of South Carolina and earned a Master of Legal Letters (L.L.M.) in Taxation from the Emory University School of Law in Atlanta, Georgia. He is a frequent lecturer at legal education and public information programs throughout the United States. His articles have been published in national and state legal publications. Jan Collins began co-authoring Flying SoloŽ in 1989. She has more than 27 years of experience as a journalist, writer, and editor. To comment or ask a question, please click here.


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Long-term care insurance comes up short
HIPAA -- too much privacy?; nursing home doc could care less
Private pay nursing home residents pay more
Separated families should use care managers
What Makes Up a Caregiving Team?
Who is the client, parents or children?:

© 2003, Jan Warner